The Future of Australian LNG Exports – Will domestic challenges limit the development of future LNG export capacity?

Executive Summary

The Oxford Institute for Energy Studies Natural Gas Research Programme has recently published a paper entitled ‘The Future of Australian LNG Exports: Will domestic challenges limit the development of future LNG export capacity?’

With seven the new LNG projects under construction and due for completion in the 2014 – 2018 timeframe amounting in addition to existing facilities, Australia is expected to overtake Qatar as the world’s largest supplier of LNG by the end of the 2010s.  With its plentiful gas reserves, prior track record of LNG project execution and operation and relative proximity to the fast growing Asian LNG markets the degree of comparative advantage would seem to guarantee a benign investment environment.

However, several factors, among them competition for skilled labour within Australia, the strength of the Australian dollar and the specific logistical and environmental sensitivities of the project locations have resulted in significant cost escalations and in some cases delays to the original project schedules.  This paper also serves to convey an understanding of the much overlooked Australian gas market and, significantly the impact that the new LNG projects are already having on internal supply/demand – price dynamics and the political challenges raised.

Much energy media attention has focused on the problems faced by the current group of new Australian LNG projects. This paper comprehensively addresses the root causes but more importantly conveys the scale of the new wave of Australian LNG supply and integrates this with its impact on the domestic market which until now has been largely isolated from global energy dynamics.  The OIES Natural Gas Research Programme is committed to producing timely and insightful research on both supply and demand side developments and this paper achieves both these objectives.

By: David Ledesma , Nyrie Palmer , James Henderson